There’s lots of talk about a recession. Some say it’s fast approaching, others think it will be later this year or early in 2024. There will be a recession; it’s part of the economic cycle. The question is how soon and how severe.
That can feel scary and uncertain. But here’s the good news – there are things you can do now to survive and thrive in any economy.
- Prepare and maintain a cash flow projection.
Cash flow is a common challenge for small businesses, even in good times. In economic uncertainty, it’s even more pronounced. Sales could slow down. Customers may delay their payments. If that happens, how will you pay your employees and suppliers?
To get ahead of these issues and avoid surprises, start projecting your cash flow on a weekly basis now. You can download our free Rolling Weekly Cash Flow Projection Template to get started. This simple tool gives you visibility of what’s coming. If excess cash is projected, you can proactively plan to put those resources to good use. If a deficit is projected, you’ll have time to focus on accelerating the cash conversion cycle.
- Maximize your most profitable products or services.
We often waste a lot of time and energy on products or services that generate small margins. You’ve likely heard of the 80/20 rule – the principle that roughly 80% of a company’s profit is generated by 20% of its customers (or product lines, divisions, etc.). Do you know your 20%?
When you know where your company really makes money, you can focus on growing the revenue streams that are most profitable, assessing those that are performing at a mediocre level, and then stop wasting energy on those that are not producing.
- Focus on the return, not just the expense.
When the fear of recession is looming, businesses often think of cuttings costs, especially wages and marketing. Though it’s not a bad idea to find opportunities to “tighten your belt,” it’s important to be intentional in your approach. If certain marketing efforts are working, cutting the cost will likely decrease your revenue.
Scrutinizing your expenses can be a tedious process. Resist the urge to blindly cut expenses across the board. Use this as an opportunity to get a better handle on where your money is going and evaluate whether your expenditures are providing the expected return on your investment.
We don’t know when and how severe the recession will be, but economic cycles are inevitable. Whether the downturn is next month or next year, these concepts are valuable and applicable any time. Prioritizing them now will set you up to survive and thrive in any economy. Start with our Rolling Weekly Cash Flow Projection Spreadsheet.